Late Thursday night, EU leaders finally admitted that their most ambitious Ukraine funding plan could not succeed. They had spent months exploring a reparations loan that would have used frozen Russian central bank assets to fund Kyiv. Supporters framed it as a historic, morally compelling move, while critics warned of legal uncertainties, financial exposure, and political risks. As the discussions reached their final stage, hesitation replaced ambition, and leaders turned back to a familiar approach, avoiding untested financial mechanisms.
Rather than seize Russian assets, governments agreed to raise €90 billion through joint borrowing on financial markets, leaving the €210 billion frozen. The funds will remain immobilised until Russia ends its war and compensates Ukraine for damages. This decision marked a clear retreat from the European Commission’s original promise and highlighted how fragile consensus can be when liability and political risk collide. Belgian Prime Minister Bart De Wever emerged as the key opponent, repeatedly arguing that using Russian assets would expose Europe to serious financial and legal consequences. Over time, his caution resonated with hesitant capitals concerned about guarantees, exposure, and the potential fallout for European banks.
From Vision to Controversy
The proposal first entered public debate on 10 September, when Commission President Ursula von der Leyen presented it during her State of the EU speech in Strasbourg. She suggested using profits from frozen Russian assets to support Ukraine’s defence and reconstruction, emphasizing that Russia should pay for the war it started. While politically bold, the speech offered few technical details, leaving member states with lingering questions and concerns.
German Chancellor Friedrich Merz then amplified the idea in a Financial Times opinion piece, framing it as both achievable and necessary. Many diplomats felt blindsided, some accusing Germany of setting the agenda unilaterally. The Commission later circulated a two-page outline of the plan, describing it in theoretical terms. That document intensified unease, particularly in Belgium, which holds roughly €185 billion of the frozen assets through Euroclear. Belgian officials felt sidelined despite their outsized exposure, and De Wever publicly demanded airtight legal certainty, shared risk, and clear protection for Belgium’s financial system.
An October summit failed to deliver agreement. Leaders tasked the Commission with exploring multiple options while von der Leyen continued to describe the reparations loan as the preferred approach. At the same time, some Nordic leaders rejected joint debt alternatives, exposing a widening political divide.
The Final Collapse
By November, von der Leyen presented three options to raise €90 billion: voluntary contributions, joint debt, and the reparations loan. She acknowledged that none offered a simple solution, but tried to address Belgian concerns with stronger guarantees and broad participation, while warning of potential reputational and financial risks for the eurozone. External events briefly strengthened the plan’s appeal when a controversial US-Russia peace framework proposed using frozen assets for shared commercial benefit, but European leaders immediately rejected it, insisting on full EU control over the funds.
Momentum collapsed when De Wever sent a sharply critical letter, describing the loan as flawed and potentially dangerous to peace negotiations. In December, the Commission published detailed legal texts, but the European Central Bank refused to provide liquidity support. Euroclear criticised the proposal as fragile and experimental, raising fears of investor exodus. Northern and eastern states defended the loan, citing Ukraine’s right to compensation, but Italy, Bulgaria, and Malta pressed for safer, more predictable alternatives.
At the decisive 18 December summit, leaders faced unlimited guarantees and the prospect of massive liabilities for Belgian banks. Confronted with that risk, they shelved the reparations loan and opted for joint debt instead. De Wever later said the outcome confirmed his expectations, arguing that no financial solution comes without real costs and that “free money” was never realistic.
